US Dollar looks for five-day winning streak on safe-haven inflows, diverging rate outlook

FXStreet
Updated Apr 17, 2024 03:39
Mitrade

■The US Dollar enters a fifth straight day of gains against most major peers. 


Markets are awaiting a change in stance from Fed Chairman Powell on Tuesday.


The US Dollar Index remains steady above 106.00 targeting now the 2023’s high. 


The US Dollar Index (DXY) rallies forward as the King Dollar gains  ground against several major peers. The Greenback is enjoying the change in narrative on the rate differential since last week, which got bigger against other currencies in favor of the US Dollar. Additional tailwind comes from Israel, which vowed yet to retaliate against Iran despite diplomatic efforts to ease tensions in the Middle East, now really putting the region back on the brink of war. 


On the economic data front, the data points will not really move the needle for the US Dollar on Tuesday. Main event comes in the form of three Federal Reserve (Fed) speakers, with  Fed Chairman Jerome Powell being the most important. Powell’s speech could be the game changer, as any change in wording on rate cut expectations or outlook from the Fed Chairman could spark either another leg higher for the Greenback or start a severe pullback. 


Daily digest market movers: Forget about the data today


At 12:30 GMT some Housing data for March is set to be released:


Building Permits are expected to decrease to 1.514 million from 1.524 million.


Housing starts are expected to decline to 1.48 million from 1.521 million.


At 12:55 GMT the year-over-year Redbook Index for the week ending April 12 will be released. The index was at 5.4% the week of April 5.


At 13:15 GMT the Fed will publish the Capacity and Industrial Production numbers for March:


Capacity Utilization will head to 78.5% from 78.3%, according to expectations.


Industrial Production is seen heading to 0.4% from 0.1%.


A slew of Fed speakers that will try to guide the markets:


At 13:00 GMT, Federal Reserve Vice Chair Philip Jefferson is due to deliver a keynote speech at the International Research Forum on Monetary Policy in Washington, DC.


Around 16:30 GMT Federal Reserve Bank of New York President John Williams will moderate a conversation at the Economy Club of New York.


Near 17:15 GMT, Federal Reserve Chair Jerome Powell will enter a discussion panel with the Bank of Canada governor Tiff Macklem at the Washington Forum. 


Equities nosedive lower after the sharp Monday’s drop, where most of major US indexes lost their initial gains to close more than 1% lower. On Tuesday, both Europe and Asia equities slid lower by more than 1%, while US futures are looking bleak ahead of the US opening bell. 


According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the May meeting are at 98.2%, while chances of a rate cut stand at 1.8%. Although there are calls for a rate hike, those are not being represented in the CME futures yet, and could add to substantial more US Dollar strength once the possibility starts to be priced in as a possibility.


The benchmark 10-year US Treasury Note trades around 4.64%. Further move upwards could even point to expectations of another rate hike before the easing cycle will start to take place. 


US Dollar Index Technical Analysis: Squeeze out the weak


The US Dollar Index (DXY) is rolling through markets and clearly the division between weak and strong currencies becomes very more clear. The Greenback looks to be the ultimate gainer while Europe and China look very bleak in terms of rates and keeping them steady for longer. WIth these main currencies set to devalue substantially further in the coming weeks and months, the end of the King Dollar does not look to be taking place anytime soon, as long as US data keeps outperforming. Bets on a weaker US Dollar will get squeezed out time after time 


On the upside, the first level for the DXY is the November 10 high at 106.01, just above the 106.00 figure, which got taken out overnight. Further up and above the 107.00 round level, the DXY Index could meet resistance at 107.35, the October 3 high. 


On the downside, the first important level is 105.88, a pivotal level since March 2023 and which proved its importance on Monday holding support. Further down, 105.12 and 104.60 should also act as a support, ahead of the region with both the 55-day and the 200-day Simple Moving Averages (SMAs) at 103.97 and 103.84, respectively.

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

Do you find this article useful?
Related Articles
placeholder
7 Powerful Forex Trading Strategies/Tips for Consistent ProfitsLearn the 7 powerful Forex trading strategies to improve your trading skills.
Author  Mitrade
Learn the 7 powerful Forex trading strategies to improve your trading skills.
placeholder
Forex Market Hours, Every Forex Trader Cannot MissKnowing what currency pairs to trade is vital in the forex market. Knowing when to trade is equally essential.
Author  Tony
Knowing what currency pairs to trade is vital in the forex market. Knowing when to trade is equally essential.
placeholder
Japanese Yen Analysis & Forecast In 2024/2025/2026: Should I Buy USD/JPY Or Other JPY Currency Pairs?At the beginning of March 2022, the USD/JPY exchange rate sharply increased due to the Federal Reserve's interest rate hike policy aimed at curbing inflation, while the Bank of Japan continued to maintain negative interest rate policies to support the economy after the COVID-19 pandemic. By mid-October 2022, the USD/JPY exchange rate reached 151.94, the highest level since April 1990. Subsequently, the USD/JPY exchange rate started to decrease following reports suggesting that the Fed would ease off on interest rate hikes from December 2022, touching 127.5 by mid-January 2023.
Author  Mitrade
At the beginning of March 2022, the USD/JPY exchange rate sharply increased due to the Federal Reserve's interest rate hike policy aimed at curbing inflation, while the Bank of Japan continued to maintain negative interest rate policies to support the economy after the COVID-19 pandemic. By mid-October 2022, the USD/JPY exchange rate reached 151.94, the highest level since April 1990. Subsequently, the USD/JPY exchange rate started to decrease following reports suggesting that the Fed would ease off on interest rate hikes from December 2022, touching 127.5 by mid-January 2023.
placeholder
Top 10 Must-Have Forex Technical Indicators That Every Trader Should UseYou can apply forex indicators to charts to visually represent market trends, patterns, and potential entry and exit points.
Author  Saqib Iqbal
You can apply forex indicators to charts to visually represent market trends, patterns, and potential entry and exit points.
placeholder
Hedging in Forex: How do Professionals Hedge?What is hedging exactly, and what is the right way to do it in Forex?
Author  Mitrade
What is hedging exactly, and what is the right way to do it in Forex?